$160 Million Improperly Spent, U.S. Education Audit Finds

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Washington--States, students, school systems, and contractors owe the U.S. Education Department (ed) more than $160 million in federal funds that auditors say were spent improperly during the past several years, according to a report issued last week by the department's inspector general.

The department is currently examining a total of 3,367 cases in which federal auditors question the way recipients spent federal funds, the semi-annual report says. According to the report, which covers ed's activities from April through September 1981, James B. Thomas Jr., the inspector general, has begun a "major project" to resolve the audits and to collect the funds allegedly owed the department.

Inspector General Act

The report is mandated by the Inspector General Act of 1978, which created independent auditing bureaus, headed by inspectors general, in 18 federal agencies.

The staff of ed's office of the inspector general conducts audits of programs paid for by federal grants and contracts; oversees collection of student loans; investigates suspected cases of fraud and refers them to the Justice Department for prosecution; and monitors the department's internal management and operations.

The ed inspector general's report is included in a government-wide report from all inspectors general, compiled by the Office of Management and Budget. Issued as "The Second Consolidated Report of the Inspectors General on Waste, Fraud, and Mismanagement," the report credits auditors throughout the federal government with recovering a total of $405 million and saving more than $1.7 billion in the six-month period.

Mr. Thomas, who has headed the bureau since it began operating in October 1980 within the newly created department, said his efforts have met with a mixed record of success. "We've come a long way in our first year of operation," he said, "but we've got a long way to go."

He explained that when his office was created, it was ordered by an act of Congress to resolve all outstanding audits within a year and to resolve any new audits within six months of initiating them.

Because a large backlog of pending audits existed at that time, the bureau has not been able to comply fully with the law, he said. A total of 1,804 audits, initiated more than six months ago, remain unresolved.

Accomplishments Cited

In spite of that, the report lists several accomplishments made by the department's inspector general during the past six months. These include:

Issuing more than 2,700 audit reports and recommending that the department collect $78.7 million in misspent funds.

Reducing the backlog of audits by resolving more than 1,200 outstanding cases, an increase of 20 percent over the previous six-month period.

Recovering $2.8 million in funds spent improperly or fraudulently, and saving the department $2.3 million more by improving management procedures.

Two major programs in which auditors found numerous "deficiencies in administration of programs" are Title I and vocational education, the report says.

Of the more than $23 million that auditors say was misspent by 14 states for Title I programs, the report places "almost all" of the blame on noncompliance by local school systems with the law's "comparability" requirements. This provision stipulates that school systems must spend as much state and local money on Title I schools (which serve disadvantaged and low-income students) as is spent on other schools, with the federal funds used for supplementary services.

Repayment of Title I Funds

Because states are required by the law to monitor federally-assisted school-system programs, states are usually asked by the department to return the federal money. Several states have appealed previous requests for repayment of Title I funds to the department's Education Appeal Board, and two states recently took the department to court to fight repayment. (See Education Week, Sept. 21 and Nov. 2.)

In addition, the auditors recommended in the report that the department recover more than $25 million that was spent improperly for vocational-education programs. The auditors accuse 10 states of such abuses as failing to return federal funds that were not spent within a required period of time; neglecting to conduct assessments of the vocational needs of communities when deciding where vocational-education centers would be built; and awarding grants to school systems without reviewing and approving grant applications beforehand.

Because the law governing vocational education also requires that states monitor the way funds are spent by local districts, states are generally asked to return misspent vocational-education funds to the federal department.

Vol. 01, Issue 14

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